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WikiLeaks cables depict Apple fight against counterfeits in China

post #1 of 22
Thread Starter 
Apple organized a security task force in 2008 to address the growing problem of counterfeit iPods and iPhones in China, according to an electronic memo recently leaked by WikiLeaks.

CNN reports that Apple recruited members of a global security team from Pfizer after they were successful at disrupting counterfeit Viagra production in Asia.

According to the report, John Theriault, who worked as a special agent for the Federal Bureau of Investigation before serving as Pfizer's security chief, heads Apple's global security unit. Don Shruhan, who worked under Theriault at Pfizer, serves as a director on Apple's security team in Hong Kong.

The leaked diplomatic cables, which were released by WikiLeaks last week, show that Shruhan told Beijing embassy officials that he was "afraid" of the amount of fake Apple products coming out of China and the company's legal team's inexperience in dealing with Chinese authorities. The documents on Apple's fight against piracy were unclassified, though many were listed as "sensitive" and "not for Internet distribution."

Indian officials discovered fake Apple products that had been shipped from China through Hong Kong, the cables also revealed.

"Shruhan said that low-profile retail raids are a good option for Apple, a company that wants to stay away from too much publicity surrounding this issue," the publication noted the documents as saying. Theriault had briefed then CEO Steve Jobs on the plans in 2008.

The documents also detail Apple's struggles to get the Chinese government to act against factories and vendors producing and selling counterfeit versions of its products. One cable from 2009 revealed that the government declined to shut down a facility making knockoff Apple laptops over concerns that it would threaten local jobs.

China came under the spotlight last month when an American blogger posted photos of an detailed knockoff Apple retail store. The attention prompted a wave of government inspections that forced several stores to close and numerous others to take down unauthorized Apple logos and signage.

Counterfeit Apple Store in Kunming, China | Credit: BirdAbroad

However, Apple is also fighting knockoff goods in its home country. The company recently executed a warrant to raid an "Apple Story" store in New York City that was allegedly selling counterfeit Apple accessories. The Cupertino, Calif., iPhone maker has filed suit against the store, as well as 50 undisclosed individuals and businesses in an attempt to crack down on counterfeit products and accessories making their way into the U.S.

"Apple Story" store in Flushing, New York | Credit: Greg Autry

In February, port authorities in Los Angeles, Calif., confiscated more than $10 million in counterfeit goods and receipts, include a number of fake iPhones and iPods, which were said to have been shipped from Asia. "This was a well-funded operation, and the counterfeits looked very authentic," said L.A. Port Police Chief Ron Boyd.

Source: L.A. Times
post #2 of 22
How does one create a counterfeit iPhone or iPod that would fool a user? Wouldn't they have to copy the OS and UI as well? Or are the Chinese just copying the design, but it's really running Windows CE or something?

"Apple should pull the plug on the iPhone."

John C. Dvorak, 2007
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post #3 of 22
Quote:
Originally Posted by AppleInsider View Post

One cable from 2009 revealed that the government declined to shut down a facility making knockoff Apple laptops over concerns that it would threaten local jobs.

As opposed to upsetting a big company like Apple that provides hundreds of thousands of jobs in China? If it is true that the Chinese government actually said that, then I hope Apple seriously raises the heat on the Chinese government at start shopping around of other production players. I find it disgusting that the chinese government is essentially turning a blind-eye to blatant theft from within their own borders.
post #4 of 22
Quote:
Originally Posted by Suddenly Newton View Post

How does one create a counterfeit iPhone or iPod that would fool a user? Wouldn't they have to copy the OS and UI as well? Or are the Chinese just copying the design, but it's really running Windows CE or something?

They must have grouped other clones that are not specific to Apple. Bottom photo shows an handheld/PDA device with a four-button navigation setup similar to a Windows CE device.

There must be enough users buying this stuff in order to make it profitable for the counterfeiters to continue making them. I too am curious what OS is running on these systems.
post #5 of 22
Quote:
Originally Posted by Suddenly Newton View Post

How does one create a counterfeit iPhone or iPod that would fool a user? Wouldn't they have to copy the OS and UI as well? Or are the Chinese just copying the design, but it's really running Windows CE or something?

My question exactly.

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post #6 of 22
Quote:
Originally Posted by sflocal View Post

They must have grouped other clones that are not specific to Apple. Bottom photo shows an handheld/PDA device with a four-button navigation setup similar to a Windows CE device.

There must be enough users buying this stuff in order to make it profitable for the counterfeiters to continue making them. I too am curious what OS is running on these systems.

I think I just answered my own question by searching YouTube for "iPhone clone". Someone has more or less (well, less) duplicated the iOS UI, right down to the "slide to unlock" control, the included wallpapers, even the camera app and calculator. See the video below.

http://youtu.be/A1OTECptmzg
(turn off the sound unless you like club music)

Perhaps this is what they are selling in the fake Apple Stores in China.
Whatever OS runs on there is sooo slow, you'd think you were using a Droid

"Apple should pull the plug on the iPhone."

John C. Dvorak, 2007
Reply

"Apple should pull the plug on the iPhone."

John C. Dvorak, 2007
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post #7 of 22
Quote:
Originally Posted by Suddenly Newton View Post

I think I just answered my own question by searching YouTube for "iPhone clone". Someone has more or less (well, less) duplicated the iOS UI, right down to the "slide to unlock" control, the included wallpapers, even the camera app and calculator. See the video below.

http://youtu.be/A1OTECptmzg
(turn off the sound unless you like club music)

I'll bet you can't access the App Store, thus, cannot install anything from it.

Also that UI is SO SLOW! So much worse than a 2007 iPhone. Looks like they did a real crappy job knocking it off, too. The phone is visibly thicker than an iPhone 3G/S. Even the animations are wrong, look at how when they swipe between home screens, the dots on the bottom also swipe. That's not how it works in iOS.

ETA: LOL at the stylus.
post #8 of 22
Quote:
Originally Posted by Suddenly Newton View Post

How does one create a counterfeit iPhone or iPod that would fool a user? Wouldn't they have to copy the OS and UI as well? Or are the Chinese just copying the design, but it's really running Windows CE or something?

I've actually used one of these, the same as in the photo. They basically have some awful old cheap MP3 player software that has unusable functions such as Radio and Cell phone. The controls are incredibly difficult to figure out as the menu key changes depending on which function you're in. Sometimes up and down is used for selection, other times left and right although the selection bar only moves up and down. This is the kind of old DOS style GUI with colored ASCII characters for everything in the menus. Sometimes you press menu for selection it's just a mess.

Even worse is that the one I used had half the actual memory advertised. There was some trick in the formatting that had 2GB show up but when you got past 1GB copies started to fail. I made the foolish attempt to reformat to 1GB but then it had no firmware and wouldn't boot up anymore. Ooops.

Believe me, these are no bargain at any price.
post #9 of 22
Quote:
Originally Posted by Don. View Post

I've actually used one of these, the same as in the photo. They basically have some awful old cheap MP3 player software that has unusable functions such as Radio and Cell phone. The controls are incredibly difficult to figure out as the menu key changes depending on which function you're in. Sometimes up and down is used for selection, other times left and right although the selection bar only moves up and down. This is the kind of old DOS style GUI with colored ASCII characters for everything in the menus. Sometimes you press menu for selection it's just a mess.

Even worse is that the one I used had half the actual memory advertised. There was some trick in the formatting that had 2GB show up but when you got past 1GB copies started to fail. I made the foolish attempt to reformat to 1GB but then it had no firmware and wouldn't boot up anymore. Ooops.

Believe me, these are no bargain at any price.

I'm sure the Chinese authorities will be all over this and protect Apple's IP!
post #10 of 22
Quote:
Originally Posted by sflocal View Post

As opposed to upsetting a big company like Apple that provides hundreds of thousands of jobs in China? If it is true that the Chinese government actually said that, then I hope Apple seriously raises the heat on the Chinese government at start shopping around of other production players. I find it disgusting that the chinese government is essentially turning a blind-eye to blatant theft from within their own borders.

Isn't Apple exploring a South American joint venture manufacturing operation? I certainly hope so..
post #11 of 22
Go on Craigslist, you will see people selling the knocks offs.

Quote:
Originally Posted by Suddenly Newton View Post

How does one create a counterfeit iPhone or iPod that would fool a user? Wouldn't they have to copy the OS and UI as well? Or are the Chinese just copying the design, but it's really running Windows CE or something?
post #12 of 22
Quote:
Originally Posted by Suddenly Newton View Post

How does one create a counterfeit iPhone or iPod that would fool a user? Wouldn't they have to copy the OS and UI as well? Or are the Chinese just copying the design, but it's really running Windows CE or something?

The people buying this stuff have no clue, they buy of street vendors and at flee markets. Honestly, i am not sure if these people are plain idiots, or they are so cheap they buy it knowing it is a knock off just so they can make people think they have money to buy the original.


Quote:
Originally Posted by sflocal View Post

As opposed to upsetting a big company like Apple that provides hundreds of thousands of jobs in China? If it is true that the Chinese government actually said that, then I hope Apple seriously raises the heat on the Chinese government at start shopping around of other production players. I find it disgusting that the chinese government is essentially turning a blind-eye to blatant theft from within their own borders.


You do not understand how China works, it is simply a job program, their goal is to have as many people working as possible, they do not allow automation to the extent that a human can do the job. Jobs are more important than anything else in china right now. The other thing you have to understand is China and its people have no concept of IP and ownership of ideas. It is a communist country and everything is for the common good. In their mind they are not stealing anything, since it belongs to everyone anyway. Now that you understand these two concept, you can see why China is not going to stop knock offs. Plus there is no where Apple can go where labor is cheaper.

Yeah do not say make in the US, no person in the US is willing to pay the addition labor costs today nor are all the entitle people willing to work for less. 50 to 100 yrs ago technology was expensive and labor was cheap in the US, now today Labor is expensive and Technologies is cheap, except in China.
post #13 of 22
Identify every part in your products built in China, and locate US companies who can provide the same parts at the same cost (I can assure you that there are companies here that could do this).

Eliminate China from the vendor picture.
post #14 of 22
Quote:
Originally Posted by axual View Post

Identify every part in your products built in China, and locate US companies who can provide the same parts at the same cost (I can assure you that there are companies here that could do this).

Eliminate China from the vendor picture.

See my comment above yours, you do not get it, no US company and produce product at such a low cost of labor as china. Also, Microsoft and the Movie studios produce nothing in China, it has not stopped China from copying their products.
post #15 of 22
Quote:
Originally Posted by axual View Post

Identify every part in your products built in China, and locate US companies who can provide the same parts at the same cost (I can assure you that there are companies here that could do this).

It's physically impossible. But go ahead; tell us about all these companies that can do this.
post #16 of 22
Quote:
Originally Posted by axual View Post

Identify every part in your products built in China, and locate US companies who can provide the same parts at the same cost (I can assure you that there are companies here that could do this).

You're dreaming. I've purchased many products from sources around the globe. It is not uncommon for parts from China to be less half the cost of the cheapest U.S. manufacturer. And that's even assuming that you can still find the product manufactured in the U.S. Heck, for a long time, it was possible to buy finished components from China for less than the cost of buying just the raw materials in the U.S. That doesn't happen all that often any more, though.
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Gatorguy 5/31/13
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"I'm way over my head when it comes to technical issues like this"
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post #17 of 22
I don't really fault China for being more interested in their own citizen's employment than whether Apple has a complaint about phones, tablets and media players that look too much like their products. They're trying to play catch-up after years of being treated as a third-rate country by much of the world, including most of the US citizenry IMO.

There was a time in our history where what was good for the US was much more important than worrying about complaints from a foreign company. We've done our share of borrowing from others.
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post #18 of 22
Quote:
Originally Posted by Don. View Post

I've actually used one of these, the same as in the photo. They basically have some awful old cheap MP3 player software that has unusable functions such as Radio and Cell phone. The controls are incredibly difficult to figure out as the menu key changes depending on which function you're in. Sometimes up and down is used for selection, other times left and right although the selection bar only moves up and down. This is the kind of old DOS style GUI with colored ASCII characters for everything in the menus. Sometimes you press menu for selection it's just a mess.

Even worse is that the one I used had half the actual memory advertised. There was some trick in the formatting that had 2GB show up but when you got past 1GB copies started to fail. I made the foolish attempt to reformat to 1GB but then it had no firmware and wouldn't boot up anymore. Ooops.

Believe me, these are no bargain at any price.

Yeah, I figured that a lot of these manufacturers were previously selling iPod clones in China as "media player super Mp3!!!" when all they had to do was slap a pressure sensor under the plastic screen, include a stylus, and add a GSM phone chip and clone Springboard UI, and you got yourself an iPhone clone. It was a natural progression for them. And quality is the last thing on their mind. I don't think they copy Apple per se as much as they copy whatever Westerners are buying in droves.

"Apple should pull the plug on the iPhone."

John C. Dvorak, 2007
Reply

"Apple should pull the plug on the iPhone."

John C. Dvorak, 2007
Reply
post #19 of 22
Quote:
Originally Posted by Maestro64 View Post

You do not understand how China works, it is simply a job program, their goal is to have as many people working as possible, they do not allow automation to the extent that a human can do the job.

That was true at one point, but is becoming much less true today. There are labor shortages in some parts of China and the cost of labor has increased enough that automating makes sense.

Heck, just a few weeks ago, there was a rumor on this site that Foxconn was planning to buy something like 300,000 industrial robots next year and a million over the next 3 years. While I believe the numbers are very wrong for the reasons I laid out at the time, clearly, robots and automation are being installed in Chinese factories.

How many Chinese factories have you been in? I've been in several - and almost all of them has at least some level of automation.
"I'm way over my head when it comes to technical issues like this"
Gatorguy 5/31/13
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"I'm way over my head when it comes to technical issues like this"
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post #20 of 22
What did you expect Apple?

Build Apple products in China, have counter fit products out on the market.

THIS IS WHY, APPLE, YOU SHOULD BUILD A FACTORY IN THE USA!

What pisses me off about Apple is that, these counterfit market is STILL less costly than to build a freaking USA plant.

"Like I said before, share price will dip into the $400."  - 11/21/12 by Galbi

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"Like I said before, share price will dip into the $400."  - 11/21/12 by Galbi

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post #21 of 22
Quote:
Originally Posted by axual View Post

Identify every part in your products built in China, and locate US companies who can provide the same parts at the same cost (I can assure you that there are companies here that could do this).

Eliminate China from the vendor picture.

You can assure?

Haven't done any research before opening your mouth, have you.
post #22 of 22
Quote:
Originally Posted by jragosta View Post

That was true at one point, but is becoming much less true today. There are labor shortages in some parts of China and the cost of labor has increased enough that automating makes sense.

Heck, just a few weeks ago, there was a rumor on this site that Foxconn was planning to buy something like 300,000 industrial robots next year and a million over the next 3 years. While I believe the numbers are very wrong for the reasons I laid out at the time, clearly, robots and automation are being installed in Chinese factories.

How many Chinese factories have you been in? I've been in several - and almost all of them has at least some level of automation.

I have been in a number of them myself, it is not that automation is not allow, it just not allow to replace a human worker that is all, if the task can not be done by a human then the government allows it. They will also allow it as long as there is human involved with the machine. One time I visited 4 factories, one in mainland china, one right outside hong kong, and another in Thailand and last one in Korea. They all produce the exact same end product, and their cycle times were nearly the same and they all used about the same type of automatic manufacturing equipment and test equipment.

In the main land china facility they had nearly 10,000 workers, they had a worker at every station in the the process and most of them were just sitting there watching the automated equipment do the work, at some stations all they did was press a button to start/stop the operation if they saw something was wrong or the equipment indicated something was not correct. Then there were others running around loading each station with material and such, then there were others running around checking everyone's work and so on. Most all the line workers were 20something female, most of the supervisors and quality and automation equipment operators were males.

Then I went to the facility in Honk Kong, far less workers, still have people at each station but less people running around, they allow the automation to do most of the work. Work force was mostly female again. This was a much old factory and had been there for a long time.

Then went to Thailand, at that factory there were about 5000 to 6000 workers, ages were 20something to 30something line worker were a mix of female and males, mostly females, The interesting part, some number of women were pregnant. (do not see this in china). This factory did not have people at every station, and mostly the people were just moving material around, not too much hands on work except for things that definitely need human involvement. The automation system control the flow of material and made pass fail decisions and shut down a station if something was not right.

Finally went to Korea, that factory only had about 2000 workers, most all were older in their late 30s or 40s, a good mix of woman and men. These people appeared to be mostly highly skill workers, they monitor what was going on and were activity involve with the process and making necessary adjustments. Very few stations actually had someone standing watch over the operations, the product went from station to station with very little human interaction. Most of the stations did not require someone loading material, this was completely automated as well.

The interesting part, two of the companies were US companies, which had the most workers in their factories. Both these companies maintain prototype line in the US. Those lines almost run without any humans involved, almost a lights out operation. So you could make the stuff in the US and be completely automated, however, it is still too costly since all the piece parts would still need to be shipped into the US and the cost associated with that and the other capital costs in the US does not make it cost effective.

So in China it is all about the labor, labor is so cheap that companies can afford to use extra workers which they otherwise do not need and still make it cheaper than fully automating it. The reason China has labor shortage right now is due to the fact of the 1 Child laws from the 1980's and the fact most companies do not want to hire men, and this is for various reason, women are preferred and they are not so many of them compared to men. Lastly women come to work from the country sides and work from age 17 to ~27 and they go back to the country side with their savings to get married and have their families.
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